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Jewellery shops in the UAE are witnessing huge decline in sales, as gold prices soar to new highs amid growing cases of coronavirus (Covid-19) outside mainland China.
The retail price of 24-karat gold in the UAE jumped by $1.3 per gram to hit $54.18 (199 UAE dirhams) on Monday, after the precious metal skyrocketed to a seven-year-high of $1,678.58.
According to Chandu Siroya, vice chairman of the Dubai Gold and Jewellery Group (DGJG), “consumers across the board,” from local buyers to tourists, have balked at rising prices, causing sales to drop by approximately 15 percent to 20 percent during the past few days compared to the beginning of the year.
“There’s been a big slowdown in the markets, not only in the UAE but everywhere. Many people are not buying, they’re waiting and watching. But then again, some people must make purchases [despite the high prices] because of some reasons, such as a wedding or a special event,” Siroya told Zawya.
The precious metal has been on a winning streak since the outbreak of the coronavirus, nearing the $1,700 mark in recent days. Some quarters have forecast that the bullion could hit $1,700 to $2,000 an ounce within the next 12 to 24 months.
“This has already hit the retail business in a big way, with the international prices rising again today by $20. Earlier, there was a $40 increase. It’s a very big jump in two or three days,” Siroya added.
The metal has been underpinned in recent weeks by huge demand from investors who are looking for safe havens amid fears that the virus, which is fast spreading in some countries like South Korea and Italy, could have a long-term negative impact on economies worldwide.
As of February 24, there were more than 79,000 people who have contracted the virus worldwide, with the majority of the cases (more than 77,000) reported in mainland China. In South Korea, there have been more than 600 infected people and at least six have died, while in Italy, some 50,000 people in the northern region have been locked down, as confirmed cases jumped from three last week to more than 130 by Sunday.
“With the virus continuing to spread outside of China, this narrative has given way to renewed concerns of the virus having a prolonged and negative impact on the global economy,” said Ole Hansen, head of commodity strategy at Saxo Bank.
Hansen said that concerns about the virus, and the combination of additional factors, such as interest rate cuts, negative US real yields, and increased worries about company earnings going forward, will continue to drive safe haven or gold demand.
Siroya, however, said that some profit taking will happen in a few days, so a price correction is possible soon.
“But you see, everything else is negative. So, if you sell, what do you do? You book your profit, where do you go?” he added.
Once “things will normalise,” Siroya said, gold could settle back in the $1,550 to $1,550 range, which works well for both the suppliers and customers or buyers.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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